Nektar Therapeutics is a research-based biopharmaceutical company that discovers and develops innovative new medicines in areas of high unmet medical need. Our research and development pipeline of new investigational drugs includes treatments for cancer, auto-immune disease and chronic pain. We leverage our proprietary and proven chemistry platform to discover and design new drug candidates. These drug candidates utilize our advanced polymer conjugate technology platforms, which are designed to enable the development of new molecular entities that target known mechanisms of action.

We continue to make significant investments in building and advancing our pipeline of proprietary drug candidates as we believe that this is the best strategy to build shareholder value. In 2017, our plan is to execute a broad clinical development program for NKTR-214 in combination with other immuno-oncology agents including Opdivo(R) (nivolumab) as part of our broad Phase 1/2 clinical collaboration with BMS in five tumor types and eight potential indications, a dose-escalation study with atezolizumab, and numerous preclinical collaboration programs. In February 2017, we filed an IND for NKTR-358, our auto-immune disease drug candidate, and plan to start the Phase 1 study for this program in healthy volunteers and then advance the program into Phase 1b in patients with systemic lupus erythematous (SLE), and other potential immune disease indications. We completed enrollment in the SUMMIT-07 Phase 3 efficacy study for NKTR-181 in late 2016 and expect to announce the top-line data in March 2017. We also have an ongoing pivotal human abuse liability study (HAL) for NKTR-181 that is expected to complete enrollment in the first half of 2017. If the NKTR-181 Phase 3 program is successful, we plan to seek a collaboration partner to support future development and commercialization activities. We are also completing preclinical research and IND-enabling work for NKTR-262 and NKTR-255 with the goal of advancing those programs into the clinic later this year or in the early part of next year. The level of our future research and development investment will depend on a number of trends and uncertainties including clinical outcomes, future studies required to advance programs to regulatory approval, and the economics related to potential future collaborations that may include up-front payments, development funding, milestones, and royalties.

We have significant milestone and royalty economic interests in approved drugs and drug candidates in late stage development with our collaboration partners. With AstraZeneca, we have a collaboration for MOVANTIK(R), an oral peripherally-acting mu-opioid antagonist for the treatment of opioid-induced constipation in adult patients with non-cancer pain. We have a collaboration with Baxalta (a wholly-owned subsidiary of Shire plc) for ADYNOVATE(R), that was approved by the FDA in late 2015 for use in adults and adolescents, aged 12 years and older, who have Hemophilia A. The FDA approved recently expanded the approval of ADYNOVATE(R) for the treatment of Hemophilia A in patients under 12 years of age, and for the use in surgical settings for both adult and pediatric patients. ADYNOVATE(R) is also under regulatory review in the European Union, Switzerland and Canada. We also have significant milestone and royalty interests in two drug development programs with Bayer. BAY41-6551 (Amikacin Inhale), which is an inhaled solution of amikacin, an aminoglycoside antibiotic in Phase 3 clinical development to treat ventilated associated pneumonia and we expect topline results from this program in the first half of 2017. The second program with Bayer Schering is the Cipro DPI (Cipro Dry Powder Inhaler, previously called Cipro Inhale) which is an inhaled dry powder ciprofloxacin in Phase 3 development to treat non-cystic fibrosis bronchiectasis. The first Phase 3 clinical study for CIPRO DPI met its co-primary endpoints for the every 14-day dosing arm of Cipro DPI and we expect top-line results from the second Phase 3 clinical study in 2017. We also have milestone and royalty interests in other collaboration partner programs including PEGPH20 with Halozyme that is in Phase 3 development and dapirolizumab pegol with UCB Pharma that is in Phase 2 development for systemic lupus erythematosus (SLE). The level of sales growth of MOVANTIK(R) and ADYNOVATE(R), together with the future clinical trial results and potential subsequent approvals of these collaboration partner drug candidates, will have a material impact on our future financial results and financial position.

Our business is subject to significant risks, including the risks inherent in our development efforts, the results of our clinical trials, the marketing of our dependence on collaborative parties, uncertainties associated with obtaining and enforcing patents, the lengthy and expensive regulatory approval process and competition from other products. For a discussion of these and some of the other risks and uncertainties affecting our business, see Item 1A "Risk Factors" of this Annual Report on Form 10-K.

While the approved drugs and clinical development programs described above are key elements of our future success, we believe it is critically important that we continue to make substantial investments in our earlier-stage drug candidate pipeline. We have several drug candidates in earlier stage clinical development or being explored in research that we are preparing to advance into the clinic in future years. We are also advancing several other drug candidates in preclinical development in the areas of cancer immunotherapy, immunology, and other therapeutic indications. While we believe that our substantial investment in research and development has the potential to create significant value if one or more of our drug candidates demonstrates positive clinical results, receives regulatory approval in one or more major markets and achieves commercial success, drug research and development is an inherently uncertain process and there is a high risk of failure at every stage prior to approval and the timing and outcome of clinical

trial results are extremely difficult to predict. Clinical development successes and failures can have a disproportionately positive or negative impact on our scientific and medical prospects, financial condition and prospects, results of operations and market value.

Historically, we have entered into a number of license and supply contracts under which we manufactured and supplied our proprietary polymer reagents on a fixed price or cost-plus basis. Our current strategy is to manufacture and supply polymer reagents to support our proprietary drug candidates or our third-party collaborators where we have a strategic development and commercialization relationship or where we derive substantial economic benefit.

Key Developments and Trends in Liquidity and Capital Resources

We estimate that we have working capital to fund our current business plans through at least March 1, 2018. At December 31, 2016, we had approximately $389.1 million in cash and investments in marketable securities. Also, as of December 31, 2016, we had $255.1 million in debt, including $250.0 million in principal of senior secured notes and $5.1 million of capital lease obligations. As is further described in Note 9 to our Consolidated Financial Statements, on October 24, 2016, we completed a public offering of common stock with net proceeds of approximately $189.3 million.

Our revenue is derived from our collaboration agreements, under which we may receive product sales revenue, royalties, license fees, milestone and other contingent payments and/or contract research payments. Revenue is recognized when there is persuasive evidence that an arrangement exists, delivery has occurred, the price is fixed or determinable, and collection is reasonably assured. The amount of upfront fees received under our license and collaboration agreements allocated to continuing obligations, such as manufacturing and supply commitments, is recognized ratably over our expected performance period under the arrangement. As a result, there may be significant variations in the timing of receipt of cash payments and our recognition of revenue. We make our best estimate of the period over which we expect to fulfill our performance obligations. Given the uncertainties in research and development collaborations, significant judgment is required by us to determine the performance periods.

Product sales

Product sales include predominantly fixed price manufacturing and supply agreements with our collaboration partners and are the result of firm purchase orders from those partners. The timing of shipments is based solely on the demand and requirements of our collaboration partners and is not ratable throughout the year.

Product sales increased for the years ended December 31, 2016 and 2015 compared to the years ended December 31, 2015 and 2014 primarily as a result of increased product demand from our collaboration partner Ophthotech related to its drug candidate Fovista(R). In the year ended December 31, 2016, product sales to Ophthotech totaled $30.1 million. In December 2016, Ophthotech announced that two pivotal Phase 3 clinical trials for Fovista(R) failed to meet their primary endpoints although a separate Phase 3 trial for Fovista(R) remains ongoing. As a result, other than approximately $10.4 million of product sales to Ophthotech related to their binding purchase commitments, we currently do not expect any further sales to Ophthotech in 2017.

Royalty revenue

We receive royalty revenue from certain of our collaboration partners based on their net sales of commercial products. Royalty revenue received in cash increased for the years ended December 31, 2016 and 2015 compared to the years ended December 31, 2015 and 2014 due primarily to the commercial launch by AstraZeneca of MOVANTIK(R) in the U.S. in March 2015 and MOVENTIG(R) in the EU in August 2015 and the launch of ADYNOVATE(R) by Baxalta in the U.S. in November 2015. We expect royalty revenue in 2017 will increase as compared to 2016 due to royalties we expect to receive from net sales of MOVANTIK(R), MOVENTIG(R) and ADYNOVATE(R) as a result of sales growth of these partnered products.

Non-cash royalty revenue related to sale of future royalties

In February 2012, we sold all of our rights to receive future royalty payments on CIMZIA(R) and MIRCERA(R). As described in Note 7 to our Consolidated Financial Statements, this royalty sale transaction has been recorded as a liability that amortizes over the estimated royalty payment period. As a result of this liability accounting, even though the royalties from UCB and Roche are remitted directly to the purchaser of these royalty interests, we will continue to record revenue for these royalties. We expect non-cash royalties from net sales of CIMZIA(R) and MIRCERA(R) in 2017 to increase marginally compared to 2016.

License, collaboration and other revenue

License, collaboration and other revenue includes the recognition of upfront payments, milestone and other contingent payments received in connection with our license and collaboration agreements and reimbursed research and development expenses. The level of license, collaboration and other revenue depends in part upon the estimated amortization period of the upfront payments, the achievement of milestones and other contingent events, the continuation of existing collaborations, the amount of reimbursed research and development work, and entering into new collaboration agreements, if any.

License, collaboration and other revenue decreased for the year ended December 31, 2016 compared to the year ended December 31, 2015 primarily as a result of the recognition in March 2015 of the $100.0 million milestone payment received from AstraZeneca as a result of the U.S. commercial launch of MOVANTIK(R) and the $40.0 million milestone payment received from AstraZeneca in August 2015 as a result of the EU commercial launch of MOVENTIG(R) partially offset by the recognition of $28.0 million in March 2016 for our 40% share of the $70.0 million sublicense payment received by AstraZeneca from Kirin.

License, collaboration and other revenue increased for the year ended December 31, 2015 compared to the year ended December 31, 2014 primarily as a result of increased revenue from payments received from AstraZeneca in 2015 as compared to 2014. During the year-ended December 31, 2014, we recognized $105.0 million of payments from AstraZeneca as a result of the FDA's approval of MOVANTIK(R) in September 2014 and recognized $9.0 million of milestone payments resulting from the transfer of our manufacturing technology to two of our collaboration partners. In addition, in 2014, we recognized $8.0 million of milestones received in December 2014 related to positive results from Baxalta's ADYNOVATE(R) Phase 3 study.

We expect license, collaboration and other revenue in 2017 to decrease compared to 2016.

The timing and future success of our drug development programs and those of our collaboration partners are subject to a number of risks and uncertainties. See "Part I, Item 1A - Risk Factors" for discussion of the risks associated with the complex nature of our collaboration agreements.

Revenue by geography (in thousands)

Revenue by geographic area is based on the locations of our partners. The following table sets forth revenue by geographic area:

The decrease in revenue attributable to European countries for the year ended December 31, 2016 compared to the year ended December 31, 2015 is primarily attributable to decreased milestone and other contingent payments from our existing European based collaboration partners, including the recognition in 2015 of a total of $140.0 million payments from AstraZeneca in connection with its commercial launches of MOVANTIK(R) described above. The increase in revenue attributable to European countries for the year ended December 31, 2015 compared to the year ended December 31, 2014 is primarily attributable to increased milestone and other

contingent payments from our existing European based collaboration partners, including the recognition of the payments from AstraZeneca in connection with its commercial launches of MOVANTIK(R) described above.

Cost of goods sold decreased during the year ended December 31, 2016 compared to the year ended December 31, 2015 primarily due to the mix of product sales, which resulted in decreases to cost of goods sold even though product sales increased during the same period. Cost of goods sold during the year ended December 31, 2015 increased compared to the year ended December 31, 2014 primarily due to the increase in product sales of $15.0 million in the year ended December 31, 2015 compared to the year ended December 31, 2014.

The improvement in product gross profit and product gross margin during the years ended December 31, 2016 and 2015 compared to the years ended December 31, 2015 and 2014, respectively, is primarily due to a more favorable product mix. In particular, the increased demand from our collaboration partners in 2016 and 2015 results in product sales where we have a relatively higher gross margin. This increased margin is partially offset by a manufacturing arrangement with another partner that includes a fixed price which is less than the fully burdened manufacturing cost for the reagent and we expect this situation to continue with this partner in future years. There were fewer shipments to this partner relative to shipments to other customers during the years ended December 31, 2016 and 2015 compared to the years ended December 31, 2015 and 2014, respectively. In addition to product sales from reagent materials supplied to the partner where our sales are less than our fully burdened manufacturing cost, we also receive royalty revenue from this collaboration. In the years ended December 31, 2016, 2015 and 2014, the royalty revenue from this collaboration exceeded the related negative gross profit.

We expect product gross margin to continue to fluctuate in future periods depending on the level and mix of manufacturing orders from our customers due to the predominantly fixed cost base associated with our manufacturing activities. We currently expect product gross margin to decrease significantly in 2017 as compared to 2016 and gross margin may approximate breakeven in 2017 as a result of the anticipated decrease in product sales from our collaboration partner Ophthotech as described above.

Research and development expense consists primarily of clinical study costs, direct costs of outside research, materials, supplies, licenses and fees as well as personnel costs (including salaries, benefits, and stock-based compensation). Research and development expense also includes certain overhead allocations consisting of support and facilities-related costs.

Research and development expense increased during the year ended December 31, 2016 compared to the year ended December 31, 2015 primarily due to costs incurred in our NKTR-214 clinical and NKTR-358 pre-clinical programs as well as increased headcount costs, partially offset by a decrease to our ONZEALDTM program costs. Research and development expense increased during the year ended December 31, 2015 compared to the year ended December 31, 2014 primarily due to the initiation of Phase 3 clinical studies for NKTR-181 in the first quarter of 2015.

We utilize our employee and infrastructure resources across multiple development and research programs. The following table shows expenses incurred for clinical and regulatory services, clinical supplies, and preclinical study support provided by third parties as well as direct materials costs for each of our drug candidates. The table also presents other costs and overhead consisting of personnel, facilities and other indirect costs (in thousands):

(1) Clinical Study Status definitions are provided in the chart found in Part I, Item 1. Business.

(2) We partnered this program with Bayer Healthcare LLC in August 2007. As part of the Novartis Pulmonary Asset Sale in 2008, we retained an exclusive license to this technology for the development and commercialization of this drug candidate.

We expect research and development expense to continue to increase in 2017 compared to 2016. In 2017, we plan to continue and expand a broad Phase 1/2 clinical development program for NKTR-214 in combination with other immune-oncology therapies including but not limited to Opdivo(R) in collaboration with BMS. For NKTR-358, we have filed an IND with the FDA and plan to begin clinical studies in the near-term. The timing and amount of our future clinical investments in NKTR-214 and NKTR-358 will vary significantly based upon our evaluation of ongoing clinical results and the structure, timing, and scope of potential collaboration partnerships (if any) for these programs. If our NKTR-181 Phase 3 efficacy study results are positive, we plan to pursue a collaboration to secure a development and commercialization partner to fund further development for NKTR-181 through direct program funding, up-front payments, milestones, or a combination thereof. In connection with our European Union collaboration partnership with Daiichi-Sankyo and our filing of a conditional approval application for ONZEALDTM with the European Medicines Agency in June 2016, we have initiated a Phase 3 confirmatory study of ONZEALDTM to support our conditional approval application. In addition, we plan to continue to make substantial investments to support the clinical and commercial manufacturing preparation and scale-up for the nebulizer devices to supply Bayer for the Amikacin Inhale program. Under our collaboration agreement with Bayer for Amikacin, we are responsible for all clinical and commercial supply of the nebulizer devices for this drug candidate and we will continue to fund our contractual obligation to support manufacturing activities for the Amikacin Inhale program.

In addition to our drug candidates that we plan to have in clinical development during 2017 and beyond, we believe it is vitally important to continue our substantial investment in a diverse pipeline of new drug candidates to continue to build the value of our drug candidate pipeline and our business. Our discovery research organization is identifying new drug candidates by applying our polymer conjugation technology platform to a wide range of molecule classes, including small molecules and large proteins, peptides and antibodies, across multiple therapeutic areas. We plan to continue to advance our most promising early research drug candidates into preclinical development with the objective to advance these early stage research programs to human clinical studies over the next several years.

Our expenditures on current and future preclinical and clinical development programs are subject to numerous uncertainties in timing and cost to completion. In order to advance our drug candidates through clinical development, each drug candidate must be tested in numerous preclinical safety, toxicology and efficacy studies. We then conduct clinical studies for our drug candidates that take several years to complete. The cost and time required to complete clinical trials may vary significantly over the life of a clinical development program as a result of a variety of factors, including but not limited to:

the number of patients required for a given clinical study design;

the length of time required to enroll clinical study participants;

the number and location of sites included in the clinical studies;

the potential for changing standards of care for the target patient population;

the competition for patient recruitment from competitive drug candidates being studied in the same clinical setting;

the costs of producing supplies of the product candidates needed for clinical trials and regulatory submissions;

the safety and efficacy profile of the drug candidate;

the use of clinical research organizations to assist with the management of the trials; and

the costs and timing of, and the ability to secure, approvals from . . .

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